The Malaysian government’s decision to introduce mandatory Employees Provident Fund (EPF) contributions for foreign workers is meant to address the country’s heavy dependence on foreign labour while promoting fairness in the domestic labour market, said Finance Minister II Datuk Seri Amir Hamzah Azizan.
The former EPF chief acknowledged that the existing labour market model favours low-wage systems that do not benefit Malaysian employees. He said that the mandatory contributions would help equalise the treatment of foreign and local labour, thereby discouraging the over-reliance on cheaper foreign labour that has historically suppressed local wages.
“When foreign labour is required to contribute to the EPF, we are inadvertently trying to equate foreign labour with local labour, so that people are not overly incentivised to start taking foreign labour along the way,” he said during a dialogue session at the ESG and Sustainability Conference 2024 organised by CGS International Securities Malaysia.
“This is not to say that we don’t like foreign labour. I think foreign labour is valuable for promoting growth. But it cannot be at the expense of employment [of locals]. It cannot be at the expense of Malaysians,” Amir added.
The move, he said, is also part of the government’s broader strategy to improve the welfare of foreign workers and ensure they have adequate savings for their future.
“We have seen a lot of improvements in terms of the welfare of foreign workers in the country, making sure that we abide by good practices as prescribed by international labour organisations. Part of that is also making sure that they can leave with something saved,” he said.
The mandatory EPF contribution will be implemented in phases, according to the Budget 2025 announcement last month, with the timeline of the said implementation yet to be revealed.
Amir said the EPF is currently working on introducing a phased implementation strategy, allowing time for both employers and workers to adjust to the new requirements. He indicated that details of the implementation will be released next year.
“We are practical about how we install it, because we don’t want disruptions along the way. But a policy change is necessary. And this policy change is what the government did through the budget this year (for 2025),” he added.
The new foreign labour policy has faced criticism from industry leaders, who argue it could increase labour costs, negatively impacting Malaysia’s competitiveness.
The Federation of Malaysian Manufacturers (FMM), following the announcement by the government, urged to delay the implementation by two years to allow sufficient time for stakeholder consultations and businesses ample time to plan and adapt.
The Master Builders Association Malaysia (MBAM) also opposed the government’s plan, saying the proposal will have significant cost implications, especially for the construction sector. – The Edge Malaysia
